The Week Ahead: The US Government Shutdown, ECB, and BOJ

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Part 2
The Week Ahead: The US Government Shutdown, ECB, and BOJ PART 2 OF 7

Speculator Positions on the S&P 500 Index for Week Ended January 19

S&P 500 Index scales another peak

The S&P 500 Index (SPY) managed another week of gains as investors ignored the possibility of a US government shutdown. However, the shutdown became a reality on Friday, January 19, after the market closed. Empirical evidence collected over the previous 18 shutdowns since 1975 traced the impact of a US government shutdown on the S&P 500 Index.

The most recent US government shutdown occurred during President Obama’s tenure in 2013. After the 16-day shutdown, the S&P 500 Index had posted gains of 3.0% for that period.

Speculator Positions on the S&amp;P 500 Index for Week Ended January 19

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Looking at the individual sector performances, the consumer discretionary, healthcare (XLV), and technology (XLK) sectors led the charge for the S&P 500 Index. The energy (XLE) and industrial sectors trended lower for the week ended January 19.

Speculators increase bullish bets

For the week ended January 19, large speculator positions on the S&P 500 (IVV) Index increased their bullish positions. The net bullish positions increased from 13,468 contracts to 23,698 contracts on January 16.

This data was reported by the Commodity Futures Trading Commission (or CFTC) through its weekly Commitment of Traders report (or COT). It is likely that investors could be unaffected by the US government shutdown, instead focusing on the earnings that are scheduled to be reported this week.

Outlook for the S&P 500 Index

This week, investors are expected to focus on earnings. Any positive developments surrounding the US government shutdown could result in minor gains for the S&P 500 Index. Key companies reporting earnings this week include Netflix (NFLX), UBS Group (UBS), and Intel (INTC).

History does not point out any serious implications to equity markets from a government shutdown. However, if the lockdown continues for an extended period, it could impact investor confidence.

In the next part of this series, we’ll analyze how the US dollar reacted to the news about the government shutdown.


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